CIOs Say Patent Trials Create Uncertainty and Hamper Innovation

As the trial between Apple and Samsung continued Wednesday in San Jose, CIOs said they were paying attention to this and other patent disputes. Some expressed concern about litigation dampening tech innovation. Others said it was important to stay on top of these disputes to understand the overall technology landscape and to make sure they’re betting on technologies that were likely to stay on the market.

“You have to be on top of it because it may alter your vision of where you see the IT industry going,” said Alexander Pasik, CIO of the professional association, Institute of Electrical and Electronics Engineers (IEEE).

The tech industry has been rife with major patent disputes, including one that threatened to shut down BlackBerry service for 3 million users in 2006. That was resolved when RIM agreed to pay patent holding company NTP a settlement of $612.5 million. Just last month, on July 23, Apple, Google, Microsoft, Samsung and 10 other companies also settled with NTP for an undisclosed amount. With Apple suing Samsung – and Samsung countersuing — in various countries around the world, patent lawsuits cumulatively create instability and a sense of uncertainty for CIOs. It’s also causing some to reconsider their strategies.

For many companies it means carefully investing in technologies. “We have limited resources and budget and we don’t want to implement something that would be off the market or has the potential to not take off,” said Armughan Rafat, CIO of Advertising Specialty Institute, a media, marketing and education organization for the promotional products industry.

Patent litigation was one reason Rafat decided not to create software for Research In Motion’s BlackBerry, and instead to focus on Apple and Android devices. On July 13, RIM was ordered to pay $147 million for patent infringement related to BlackBerry Enterprise Server to a company called Mformation Technologies.

“Given the diminishing fortunes of BlackBerry and RIM, as well as the patent dispute, we’re not thinking of investing on a platform that would run on BlackBerry at this point,” said Rafat.

Rafat also argues that intellectual property laws are being abused. “There’s a need for patents to protect true innovation but not things that aren’t true innovation,” he said. Rafat, who has been awarded one patent and has another one pending, cited the argument Tuesday between Samsung and Apple lawyers in court about the originality of the iPhone’s rectangular shape with rounded corners as one that is frivolous.

The result is that companies may be deprived of new tools they could use to help run their businesses. “By any measure [patent litigation] is reducing competition and it’s reducing innovation,” said Daniel Stroot, CIO of Allianz Global Investors of America. “We’re headed in the wrong direction when it comes to innovating in the IT space.”

Stuart Kippelman, CIO of Covanta Energy, a company that operates facilities that turn trash into clean renewable energy, wondered how Apple and Samsung could have gotten to this point. He holds a few patents from his previous work at Johnson & Johnson. Filing a patent, “was such a complicated and expensive process that it’s hard to believe that these companies could get to the point of not knowing that something is or isn’t patented,” he says. Yet, “the fact that companies are suing over concepts and ideas will scare a lot of startups and it could slow down the pace of innovation,” he adds.

For a startup, the costs of defending against a patent infringement lawsuit can be “jaw-dropping,” wrote CNET’s Jim Kerstetter. A survey published by the American Intellectual Property Law Association found that the median legal costs are $650,000 for a claim that could be worth less than $1 million.

Comments (1 of 1)

What caught my eye when surfing about legal costs was the line "median legal costs are $650,000 for a claim that could be worth less than $1 million". We see this all the time here in Ireland that the eventual legal costs undo most of the reason for pursuing a claim in the first place. Realistic provisions for legal costs in the event of a dispute are a necessity for anyone enaged in a public pursuit with financial implications, whether that be filing a patent or putting together a business plan.

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